Vying For The Fast Track

Which of the 50 states will prosper?

With the U.S. about to chalk up its longest expansion in history, virtually every state is enjoying healthy job growth. But the general euphoria conceals some sharp divergences in resources, policies, and performance that suggest some states could fall increasingly behind as others enjoy rising prosperity in the years ahead.

That's the implicit message of the latest annual development report card issued by the Corporation for Enterprise Development (CFED), a Washington-based nonprofit group that assesses individual states' economic strengths. To rate the states, the CFED has created three broad indexes: (1) performance, which includes job growth and job quality, income distribution, and efficient use of natural resources; (2) business vitality, which reflects competitiveness, investment, and startups; and (3) development capacity, which weighs human, financial, technological, and physical resources.

The good news is that eight states made the CFED's honor roll in 1999, the most in this decade with As and Bs in all three areas. In addition to the five in the table above, these include Delaware, Michigan, and New Jersey. Among poor performers, only West Virginia got all Fs.

On a regional basis, the Northeast led the pack, with strong scores in job quality, efficient use of resources, entrepreneurship, and human capital. The industrial Midwest was runner-up, scoring high in business vitality, job quality, income equity, and financial resources.

Meanwhile, the South posted strong growth in net migration and employment, but was held back by high poverty rates and weakness in human resources. The Plains States were mostly average, with some poor marks in competitiveness and economic diversity.

Although the Mountain States contained Colorado and Utah, the nation's top scorers, its other members had average scores at best, and one, New Mexico, was one of the worst ranked states. Similarly, the strong performance of Pacific Region honor-roll members Washington and Oregon was offset by lingering employment problems in California, Alaska, and Hawaii.

Looking ahead, the CFED is especially concerned about the growing concentration of resources for innovation. While the nation's research and development outlays are hitting new highs, venture-capital investments are targeting relatively few states--with California garnering 46% of the total last year and eight states receiving none at all. If this pattern continues, those states left out in the cold could find themselves falling further and further behind.

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